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No Class Action for Now in Costco Gender Bias Case

Costco Wholesale Corp won a court decision that blocks women who accused the company of gender bias from suing as a group, but the court left open the possibility that the case could regain class-action status.

The case involved about 600 current and former female Costco workers who said the largest U.S. warehouse club chain made it harder for them to be promoted to general manager or assistant general manager, in part because it failed to post job openings.

Citing a recent U.S. Supreme Court ruling in favor of Wal-Mart Stores Inc, the 9th U.S. Circuit Court of Appeals in San Francisco said a lower court judge applied the wrong legal standard, having failed to decide whether there was enough in common among the women’s claims.

But the appeals court returned the case to U.S. District Judge Marilyn Hall Patel in San Francisco to decide whether she could still certify a class, and whether the plaintiffs can seek back pay and punitive damages.

In its June 20 ruling in Wal-Mart Stores Inc v. Dukes, a divided Supreme Court had thrown out a class-action lawsuit on behalf of as many 1.5 million female workers who claimed that retailer gave them lower pay and fewer promotions than men.

Writing for a unanimous three-judge panel of the 9th Circuit, Judge N. Randy Smith said that ruling requires Patel to now “determine whether there was significant proof that Costco operated under a general policy of discrimination.”

Smith nonetheless rejected what he said seemed to be Costco’s argument that the “rigorous analysis” required in the Wal-Mart case include an “in-depth” examination of the merits of the Costco plaintiffs’ case. “To hold otherwise would turn class certification into a mini-trial,” he wrote.

PLAINTIFFS, COSTCO SAY ARE PLEASED

Denying class-action status can result in higher costs and lower recoveries, and cause some plaintiffs with smaller or weaker claims to drop their cases altogether.

The Costco lawsuit began in 2004. Patel in 2007 granted class-action status for the three named plaintiffs and others. The case was put on hold pending the Wal-Mart ruling.

Jocelyn Larkin, executive director of The Impact Fund, which handled the case for the women plaintiffs, said “we are absolutely delighted” with the 9th Circuit decision.

“The district court had found that Costco had a common process for promotions, and statistical evidence that this adversely affected women — sufficient for certification,” she said. “Costco did not get the outcome it wanted, a finding that we would be unable under any circumstances to get the class certified.”

Joel Benoliel, Costco’s chief legal officer, said: “We are extremely gratified that our major points in the case have been vindicated, and it’s clear the court has shut the door on a nationwide class. We will continue to defend this case.”